Citibank Asia-Pacific Credit Card Case Analysis Presentation for Asia Business Case Studies, Asia MBA, Sungkyunkwan University - November 24th, 2010

1. Mariette Lena Pia Than
Abovici Flickschuh Hochgerner Rassadanukul
Launching the Credit Card in Asia Pacific

2. [2]
Content
Q.0: Breakeven Analysis
Q.1: To launch or not to launch?
Q.3: Where to launch?
Q.5: Achieving $100 M without
launching card

3. How many customers does Citibank
need to breakeven on its
investments?
BREAKEVEN ANALYSISQ0

4. [4]
Breakeven Analysis: Assumptions
 Targeting and market share between classes are same
as Hong Kong (Table B)
 Average revenue per customer (from Table B) = $162.65
 Linear interpolation used for direct cost
 $25 for 250,000 customers
 $7 for 1,000,000 customers
 Guessing the breakeven at 450,000 = $20.2
 Acquisition strategy same as Singapore (Table A)
 Acquisition cost (from Table A) = $51.47
 Direct cost applies to both new and existing customers
 Acquisition cost only applies to new customers
 Make two guesses, then take the average:
 Same number of acquisition each year
 250,000 in the first year, whatever left on the second year

5. [5]
Number of Customers 250,000 425,727 442,104 500,000 750,000 1 M 1.25 M
Avg Rev per Customer $162.65 $162.65 $162.65 $162.65 $162.65 $162.65 $162.65
Less
Avg Direct cost/cust $25.00 $20.20 $20.20 $19.00 $13.00 $7.00 $7.00
Avg Acquisition cost/cust $51.47 $51.47 $51.47 $51.47 $51.47 $51.47 $51.47
Total Direct Costs $76.47 $71.67 $71.67 $70.47 $64.47 $58.47 $58.47
Contribution – New $86.18 $90.98 $90.98 $92.18 $98.18 $104.18 $104.18
Contribution – Existing $0.00 $142.45 $142.45 $143.65 $149.65 $155.65 $155.65
# of New Customers 250,000 175,727 221,052 250,000 250,000 250,000 250,000
# of existing customers 0 250,000 221,052 250,000 500,000 750,000 1,000,000
New Contribution 21.5 M 16.0 M 20.0 M 23.0 M 24.5 M 26.0 M 26.0 M
Existing Contribution 0 M 35.6 M 31.5 M 35.9 M 74.8 M 116.7 M 155.7 M
Total Contribution 21.5 M 51.6 M 51.6 M 59.0 M 99.4 M 142.8 M 181.7 M
Fixed Cost: Infrastructure 35 M 50 M 50 M 50 M 75 M 100 M 115 M
Profit/Loss before
Advertising
(13.5 M) 1.6 M 1.6 M 9.0 M 24.4 M 42.8 M 66.7 M
Advertising 1.6 M 1.6 M 1.6 M 1.6 M 1.6 M 1.6 M 1.6 M
Cumulative Profit/Loss (15.1 M) $39 $38 7.4 M 22.8 M 41.2 M 65.1 M

6. [6]
Breakeven Analysis - Results
 The results were around 425,727 and 442,104
 The average is 433,916 customers
In order to reach breakeven point,
Citibank must acquire approximately
430,000 customers in two years after
launching

7. Should Citibank launch the card
product? Why or why not? Support
your decision with data (numbers).
TO LAUNCH OR NOT TO LAUNCH?Q1

8. [8]
Q1: To Launch or not to Launch?
 From the financial perspective
 Assuming that the credit card gets 250,000 new
customers annually (same as the table from Breakeven
analysis)
 0.25 Million customers on the first year,
to 1.25 Million customers on the fifth year
 Use the average of five year averages of each country
for inflation rate = 5.6%
 Net Present Value (NPV) = $94.4 Million
 Internal Rate of Return (IRR) = 118%

9. [9]
Q1: To Launch or not to Launch?
 From the marketing perspective
 Many countries’ market are still underdeveloped
 Rapid growth in the ASEAN region
 High market potential
 Some markets are saturated or unsuitable, simply avoid
them
Citibank should launch their credit
card product. The potential is good
from both financial and marketing
perspectives.

10. Which countries should Citibank
enter first? Which countries should
it avoid? Support with numbers and
data.
WHERE TO LAUNCH?Q3

11. [11]
Q3: Where to Launch?
Thailand HK Malaysia
Population 55.0 5.6 16.9
Urban Population (%) 20% 90% 38%
Urban Population 11.0 5.0 6.4
Target Population (%) 25% 85% 35%
Target Population 13.8 4.8 5.9
Growth 10.8 % 7.3 % 8.1 %
5 year Growth 7.2 % 8.4 % 4.2 %
Inflation 3.8 % 7.4 % 2.0 %
5 year Inflation 2.3 % 5.5 % 1.6 %
Politics B B B
Consumer Good Good Good
Competition Low High Medium
 Launch as soon
as possible
(mandatory)
 Thailand
 Everything’s good
 Hong Kong
 Regional financial
center
 Malaysia
 Almost all good

12. [12]
Q3: Where to Launch?
Australia Indonesia Singapore
Population 16.5 167.7 2.7
Urban Population (%) 85% 25% 100%
Urban Population 14.0 41.9 2.7
Target Population (%) 80% 7% 20%
Target Population 13.2 11.7 0.5
Growth 4.0 % 4.8 % 11.0 %
5 year Growth 4.6 % 4.2 % 5.6 %
Inflation 7.6 % 8.0 % 1.5 %
5 year Inflation 7.1 % 7.6 % 0.7 %
Politics A C B
Consumer Good Good Good
Competition High Medium High
 Launch later,
when the market
condition is good
(optional)
 Australia
 Stable and large
market
 Indonesia
 Potential future
market
 Singapore
 Future finance
center

13. [13]
Q3: Where to Launch?
India Philippines Taiwan
Population 797.0 61.9 19.8
Urban Population (%) 23% 50% 72%
Urban Population 183.3 31.0 14.3
Target Population (%) 5% 30% 78%
Target Population 39.9 18.6 15.3
Growth 9.7 % 6.8 % 7.3 %
5 year Growth 6.1 % 0.5 % 9.3 %
Inflation 9.8 % 8.7 % 1.2 %
5 year Inflation 8.2 % 16.6 % 0.5 %
Politics C D A
Consumer Cash Good Cash
Competition Medium Low Restricted
 Do not launch
(avoid)
 India
 Too undeveloped
 Philippines
 Too unstable
 Taiwan
 Too soon
 Korea
 Too problematic

14. [14]

15. If you choose not to introduce the
card, what would you do to achieve
the $100 million earnings target by
1990? What kind of branch banking
products should the bank offer?
ACHIEVING $100 M WITHOUT CARDQ5

16. [16]
Q5: Achieving $100 M without card
 Current: earning before tax (EBT) $69.7 million
with $209.0 Million net revenue from fund
 Target: earning before tax (EBT) $100 million
with $299.9 Million net revenue from fund (linear
extrapolation)
 Have to earn $91 million more in annual revenue

17. [17]
Q5: Achieving $100 M without card
 Market Development
 IPB – offer in more
markets
 Citigold – improve or
start new locations

18. [18]
Q5: Achieving $100 M without card
 Market Penetration
 Citigold – acquire
customers
 Mortgage – acquire
customers/partners
 Autoloan – acquire
partners

19. [19]
Q5: Achieving $100 M without card
 Diversification and
Product Development
 Technology – Internet
and Mobile Banking
 Insurances
 Financial – New types
of loans

20. Presentation slides available at:
http://slidesha.re/citibankcase
THANK YOU!